When a page is requested, WordPress finds out its type (single post, page, category and so on) and looks for a template file in a fixed order, from the most specific name to the most general one. The last choice is always index.php.
front-page.php, then home.php or page.php, index.php
404
404.php, index.php
You can test it with a theme where each file prints its own name. We did exactly that in WordPress Template Hierarchy. In block themes the same logic is used, but with files like templates/single.html.
